Correlation Between DENTSPLY SIRONA and Newell Brands

Can any of the company-specific risk be diversified away by investing in both DENTSPLY SIRONA and Newell Brands at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DENTSPLY SIRONA and Newell Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DENTSPLY SIRONA and Newell Brands, you can compare the effects of market volatilities on DENTSPLY SIRONA and Newell Brands and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DENTSPLY SIRONA with a short position of Newell Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENTSPLY SIRONA and Newell Brands.

Diversification Opportunities for DENTSPLY SIRONA and Newell Brands

-0.58

Correlation Coefficient

DENTSPLY SIRONA  Newell Brands

Excellent diversification

The 3 months correlation between DENTSPLY and Newell is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding DENTSPLY SIRONA and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands and DENTSPLY SIRONA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DENTSPLY SIRONA are associated (or correlated) with Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of DENTSPLY SIRONA i.e., DENTSPLY SIRONA and Newell Brands go up and down completely randomly.

Pair Corralation between DENTSPLY SIRONA and Newell Brands

Assuming the 90 days trading horizon DENTSPLY SIRONA is expected to generate 0.06 times more return on investment than Newell Brands. However, DENTSPLY SIRONA is 17.35 times less risky than Newell Brands. It trades about 0.24 of its potential returns per unit of risk. Newell Brands is currently generating about -0.35 per unit of risk. If you would invest  13,955  in DENTSPLY SIRONA on October 11, 2024 and sell it today you would earn a total of  68.00  from holding DENTSPLY SIRONA or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

DENTSPLY SIRONA  vs.  Newell Brands

DENTSPLY SIRONA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DENTSPLY SIRONA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DENTSPLY SIRONA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Newell Brands

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Newell Brands are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Newell Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DENTSPLY SIRONA and Newell Brands

The main advantage of trading using opposite DENTSPLY SIRONA and Newell Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DENTSPLY SIRONA position performs unexpectedly, Newell Brands can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Newell Brands will offset losses from the drop in Newell Brands' long position.

The idea behind DENTSPLY SIRONA and Newell Brands pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.